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Understanding umbrella coverage

If you’ve ever heard the term “umbrella coverage,” your first thought might have been weather-related. But in the insurance world, umbrella coverage has nothing to do with actual umbrellas. So, what is umbrella coverage? How does it work? And who should buy an umbrella policy? We might not be able to help you track down your elusive umbrella, but we do have the answers to your umbrella insurance questions.

What is an umbrella insurance policy?

An umbrella insurance policy allows you to extend your third-party liability coverage beyond the limits in your existing home and car insurance policies. In addition to providing excess third-party liability coverage, an umbrella policy may also provide additional coverages that aren’t already included in your home or car insurance policy (e.g., protection in the event of false arrest, slander, or an invasion of your right to privacy).

How does umbrella coverage work?

In the event that you’re sued, you’ll count on your home or auto liability coverage to cover the costs associated with the lawsuit. But lawsuits can be really expensive, and if your liability claim exceeds the limit in your standard home or car insurance policy, you’ll be responsible for paying the remaining balance — if you don’t have umbrella coverage, that is. If you do have umbrella coverage, your umbrella coverage will come into effect after your standard liability coverage has run out, meaning you won’t have to dip into your own savings (or worse, file for bankruptcy) to cover the balance.

Lawsuits can be really expensive. If you don’t have umbrella coverage and your liability claim exceeds the limit in your standard insurance policy, you’ll be responsible for paying the remaining balance yourself.

Who should purchase an umbrella policy?

Anyone can benefit from an umbrella policy — it’s impossible to predict an accident that might result in a lawsuit, and lawsuits are becoming more and more expensive. An umbrella policy is a relatively inexpensive way to make sure you have enough liability coverage to protect your financial security. It’s especially important to consider purchasing umbrella coverage if you have expensive assets or investments you want to protect, or if you participate in any activities that could increase your chances of being sued, such as:

  • Renting out property
  • Coaching kids’ sports teams
  • Participating in sports where you could injure others

Anyone can benefit from an umbrella policy — it’s impossible to predict an accident that might result in a lawsuit, and lawsuits are becoming more and more expensive.

Can you buy an umbrella policy if you don’t already have liability coverage?

Since umbrella coverage is designed to provide excess liability coverage (above and beyond the coverage in your existing policies), most insurers will require you to buy a regular insurance policy before you can purchase an umbrella policy. In the event that you’re sued, your umbrella policy won’t kick in until the coverage in your other policies runs out.

Where can you buy umbrella insurance?

If you already have a home or tenant insurance policy, contact your licensed insurance broker and ask about umbrella coverage. You’ll likely need to buy umbrella coverage from the same insurer who provides your home insurance — most insurers won’t sell you an umbrella policy if you bought your standard coverage from another company. If you’re just starting out on your insurance journey and don’t yet have an insurance broker, find one near you today.  


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